Silicon Motion Technology (SIMO) Earnings Growth And 13.8% Margin Challenge Long Term Bearish Narratives

Silicon Motion Technology's FY 2025 Results Set The Stage For The Next Chapter

Silicon Motion Technology (NasdaqGS:SIMO) closed out FY 2025 with fourth quarter revenue of US$278.5 million and basic EPS of US$5.69, capping a year in which trailing twelve month revenue reached US$885.6 million and net income, excluding extra items, totaled US$122.6 million. Over the past six quarters, the company has seen quarterly revenue range from US$166.5 million to US$278.5 million while basic EPS moved between US$0.49 and US$5.69. Over the same period, trailing net margins most recently stood at 13.8% compared with 11.1% a year earlier. Taken together, the latest numbers point to profitability that is holding up and margins that are an important focal point for how this earnings release lands with investors.

See our full analysis for Silicon Motion Technology.

With the headline figures on the table, the next step is to set these results against the most common narratives around Silicon Motion Technology, highlighting where the numbers back up the story and where they start to question it.

Curious how numbers become stories that shape markets? Explore Community Narratives

37.4% earnings growth reshapes recent track record

• Over the last 12 months, earnings grew 37.4% and net margin was 13.8% compared with 11.1% a year earlier, which sits against a five year period where earnings declined at an annual rate of 12.1%.
• What stands out for a more bullish take is that this 37.4% earnings growth and the move to a 13.8% margin both contrast with the longer term earnings decline, which
  • supports the idea that recent profitability looks stronger than the five year history suggests, based on the data you have.
  • also leaves open how durable this shift is, because the long run trend still points to earnings falling at a 12.1% annual rate over that period.

To see how this sharper recent profitability stacks up against longer term expectations and valuation, you might want to read the full balanced take on the story. 📊 Read the full Silicon Motion Technology Consensus Narrative.

P/E of 35.6x versus DCF fair value of US$88.65

• The stock trades on a trailing P/E of 35.6x, below the US Semiconductor industry average of 42.2x and peer average of 57.7x, while the current share price of US$128.37 sits above a DCF fair value of US$88.65 from this dataset.
• Critics highlight that the gap between the US$128.37 price and the US$88.65 DCF fair value weighs against the more optimistic view that a below peer P/E alone makes the shares look inexpensive, because
  • a lower P/E relative to the 42.2x industry and 57.7x peers can be read as supportive for a bullish valuation angle on earnings, yet
  • the DCF fair value being below the market price points to a different conclusion when you focus on the cash flow stream implied by the same set of inputs.

High non cash earnings and 1.56% dividend coverage risk

• Reported earnings include a high level of non cash items and the 1.56% dividend yield is flagged as not comfortably covered by free cash flow in the data provided.
• Bears argue that this combination weakens the quality angle of the recent 37.4% earnings growth, because
  • if a large share of profit is non cash, the 13.8% net margin may not translate into equally strong cash generation for reinvestment or payouts.
  • the weak free cash flow coverage of a 1.56% dividend suggests that cash returns to shareholders lean heavily on reported earnings rather than on surplus cash.

Next Steps

Don't just look at this quarter; the real story is in the long-term trend. We've done an in-depth analysis on Silicon Motion Technology's growth and its valuation to see if today's price is a bargain. Add the company to your watchlist or portfolio now so you don't miss the next big move.

See What Else Is Out There

The recent 37.4% earnings growth sits alongside a DCF value below the share price, high non cash earnings and a dividend that is not comfortably backed by free cash flow.

If you are concerned about paying up for earnings that rely heavily on accounting items and thin cash coverage, check out these 868 undervalued stocks based on cash flows to focus on companies where pricing and fundamentals look more tightly aligned.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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